Seema Verma, the former health policy consultant now overseeing Medicare and Medicaid for the Trump administration, will not take part in one of her agency’s most anticipated decisions because of a conflict of interest.

The case concerns whether to allow Kentucky to become the first state in the nation to require some Medicaid recipients to work to qualify for health coverage. That change and others in Kentucky’s proposal are generally favored by conservative Republicans — and have been encouraged by the Trump administration.

The work requirement is one of the most controversial features of Kentucky’s proposed strategy to drastically remake its Medicaid expansion under the Affordable Care Act, which added about 440,000 low-income adults to the program since 2014. The state wants Verma’s agency, the Centers for Medicare & Medicaid Services, to grant it a waiver from federal Medicaid rules to put its plan into effect.

Verma helped write Kentucky’s Medicaid overhaul plan last year through her health consulting business, which worked closely with several states. The Obama administration did not rule on Kentucky’s application after its submission in August, though it consistently denied efforts by Republican-controlled states to add a work requirement to Medicaid, the federal-state health insurance program for low-income Americans.

President Donald Trump has signaled that his administration will be open to allowing such a work requirement. Trump offered to allow states to add the mandate in his failed effort last month to persuade the House to pass a partial repeal of the Affordable Care Act, known as Obamacare.

“We are going to work with both expansion and non-expansion states on a solution that best uses taxpayer dollars to serve the truly vulnerable,” Health and Human Services Secretary Tom Price and Verma said about their plans for Medicaid in a joint letter to governors in March.

With the exception of the work requirement, Kentucky’s waiver request is largely modeled on the Indiana Medicaid expansion, which was chiefly designed by Verma as a top consultant to the state and then-Gov. Mike Pence, now the vice president.

The complex plan requires even the poorest enrollees to make small monthly contributions toward their coverage. Advocates say that gives them “skin in the game” to encourage them to make better health decisions. Critics worry the strategy will prevent poor people from enrolling in Medicaid and erode progress in reducing the uninsured population.

Kentucky Gov. Matt Bevin, who was elected in 2015, has argued his state can’t afford Medicaid in its current form. Obamacare permitted states to use federal funds to broaden Medicaid eligibility to all adults with incomes at and below 138 percent of the federal poverty level, now $16,643 for individuals.

The Medicaid expansion under Obamacare in Kentucky has led to one of the sharpest drops in any state’s uninsured rate, to under 8 percent in 2016 from 20 percent two years earlier.

Bevin threatened to roll back the expansion if the government would not allow him to make major changes, such as requiring Kentucky’s beneficiaries to pay monthly premiums of $1 to $37.50 and mandating nondisabled recipients to work or do community service for free dental and vision care.

Budget pressures are rising this year in the 31 states and the District of Columbia where Medicaid was expanded as the federal government reduces its share of those costs. States are picking up 5 percent of the cost in 2017 and that portion will rise gradually to 10 percent by 2020. Under the health law, the federal government paid the full cost of the Medicaid expansion population for 2014-16.

Health experts said they were not surprised by Verma’s recusal, though they expect it will not prevent CMS from ultimately approving the Kentucky waiver with some type of work requirement.

“It’s certainly likely to be approved — the only question is some of the details, like who may be exempted,” said Judy Solomon, a health policy expert with the left-leaning Center on Budget and Policy Priorities.

A CMS spokeswoman did not respond to queries about which CMS official would decide the Kentucky waiver request or what other decisions Verma might recuse herself from.

Verma also is expected to recuse herself from CMS’ decision on the latest Indiana Medicaid expansion waiver, which was submitted Jan. 31.

In her Senate confirmation hearing, Verma said she would not participate in matters involving former clients or parties represented by former clients for at least one year. In addition to consulting projects with Indiana, Kentucky and other states, Verma worked with large Medicaid contractors including Hewlett Packard Enterprise and Milliman. She sold her consulting company, SVC, to another health care consultancy, Health Management Associates.

This story was produced by Kaiser Health News, an editorially independent program of the Kaiser Family Foundation.